The loss of mental capacity by a claimant during the period of the claims process is not grounds to “terminate” a conditional fee arrangement (CFA), an appeal judge has recently ruled.

Two years previously, a hospital patient entered a conditional fee arrangement (CFA) - a “no win no fee” claim - with their solicitors for clinical negligence after suffering injuries during an operation. Although all parties concerned agreed that judgement should be entered, the claimant had subsequently been diagnosed as lacking mental capacity.

Contested liability

In response, the hospital argued that the diagnosis of incapacity “automatically terminated” the CFA and contested their liability to pay the legal costs. As a consequence, the claimant would be left without a retainer and be liable to pay their own costs.

At the initial hearing, the district court ruled in favour of the defendant (acting on behalf of the hospital), which was overturned by the judge at the High Court who said that the “intervening incapacity did not frustrate or otherwise terminate a solicitor's retainer.”

Reasonable expectation of risk

At the subsequent Court of Appeal, the judgement was again upheld in favour of the claimant. Commenting on the Court of Appeal's judgment, the claimant’s solicitors said that as a result of negligence during surgery, their client had suffered significant brain injury. Despite a temporary regaining of mental capacity “ it was reasonable to expect that there was a risk” that the capacity would be lost.

Given the unique challenge to the CFA, the ruling was also regarded as “useful clarification” that an unexpected occurrence of mental incapacity does not terminate the terms of the standard CFA.

The Association of Costs Lawyers said the upheld ruling was “ a common sense decision” adding that “where a client loses capacity ...there will be no need to enter into a further funding arrangement and it should also avoid further litigation.”